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As the 2008 financial crash fades into history, a sudden lack of availability of cheap money for big industrial projects could undermine some of the newer renewables enterprises, if or when bankers start asking for their ‘umbrellas’ back.

The chief executive of Spanish utility Iberdrola, Ignacio Galan, has warned of the prospect of financial disaster for the global renewable energy sector, reminiscent of the collapse of Enron, reports PEI.

Galan said that the imminent end of cheap finance would have a damaging impact on the new players to the green energy market, adding that these new non-industrial entrants with little experience were making overly aggressive bids on contracts to build renewable energy, thinking it was a financial “El Dorado”.

“Because money is so cheap, many people who have no talent in the sector have been coming with an extremely high level of leverage,” he told the Financial Times. “With the change of the rates, there will be a clean up of the sector.”

As the company on Wednesday reported a 3.6 per cent rise in full-year net profit to €2.8bn and €32bn in investment over the next five years, he added: “I think that what happened with Enron [could happen again]. Enron was highly leveraged . . . and they had no talent as a utility or as traders. And what happened — it disappeared.”

Mr Galán was not accusing any new entrants in the renewable sector — some of whom are private equity or infrastructure funds — of the kind of false accounting that led to US energy trader Enron’s collapse in 2001. He was instead highlighting how cheap money was pushing some into a business they did not understand.

The warning speaks to a wider fear about the potential disruption to global businesses as central bankers start to unwind a multi-trillion-dollar experiment in ultra-loose monetary policy.

Mr Galán said: “Bankers always give an umbrella when it is not raining, but when it rains they ask for it back.”

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“Rather than just give flat-rate subsidies to new power plants, companies compete to build new capacity at the lowest possible level of subsidy for any given technology, whether it be traditional fossil fuel-based power plants, established renewables like solar and onshore wind, or less established technologies like offshore wind.

The difference between the average price that comes out of the auction and the market price is the bit that the government pays”.

Before the snake oil con men of “Renewable” energy took control of the political machines, dependable base line power received the premium price and undependable suppliers were greatly penalized with hookup fees and monthly capacity charges, often greater then the value of any power produced. Only dependable suppliers need apply and those that were part of the grid operator’s operation received first consideration.
Now days the “Renewables”, “By Law”, receive the top dollar, are first at the pay line, and others must make up any additional costs for providing dependable supplies. All of this was developed and promoted by the conmen of Enron Corp.to fleece energy users of vast sums and was sold as such to their fellow travelers. “Join the Future” and get rich! For Enron the payday was too late to save them but their Con-game continues. For those of us that are the taxpayers and rate payers the costs of this will go on for a long time even if the damage is stopped tomorrow…pg

tom, I suspect that the UK will be like the US – rusting hulks filling the skyline. Even if they did take down the towers they will never remove the concrete pads and roads which will prevent the land going back to what it was.